Payroll Briefs

Addressing Pay Equity at Your Company

June 28, 2023

Increased social awareness and workplace transparency have made pay equity more than just a standard compliance issue for many companies today. Business leaders are under increased pressure to fully understand and thoroughly respond to the issue of pay equity. Neither of those two broad challenges is a straightforward task.  

To start, fully understanding what pay equity is and the current situation at your company calls for research, analysis and possibly some challenging conversations. The second part, responding to it in practical and effective ways, can entail changing long-standing employment processes and investing in training and communication initiatives.   

Understanding Pay Equity 

Pay equity is the concept of compensating employees who have similar job functions with comparably equal pay, regardless of their gender, race, ethnicity or other status. Otherwise stated as “equal pay for equal work.” Which is much easier said than done. Pay equity means compensation is free of unjust biases historically related to demographic factors such as age, race, gender, disability, national origin and sexual orientation. Employees’ pay, both upon hire and as adjusted through raises, should be determined on the basis of objective, relevant factors such as education and training, experience, skills, performance and tenure. 

Understanding where and if pay inequities exist within your business will entail a careful and honest assessment. To do this, many companies conduct a formal pay equity audit. This is a statistical analysis of compensation history, policies and pay structure. The objective of the audit is to identify any inconsistencies, gaps and incongruities that cannot be clearly explained.  

Best Practices to Support Pay Equity 

To prevent instances of inequitable pay at your organization, here are some best practices to consider implementing:  

  • Use only initials or random ID numbers during early screenings of job candidates. This will minimize the ability to distinguish candidates by any factors outside of the requirements of the job. In turn, reducing the likelihood of biases in the hiring and initial compensation decisions.  
  • Refrain from asking candidates about their pay history. Women and people of color are more likely to have been paid less in their previous positions. Therefore, using historical compensation to determine their salary for this role only compounds pay disparities.  
  • Generate an objective criterion for recruiting, hiring, compensating, evaluating and promoting employees. Implement standard pay ranges that are reflective of each position’s value to the business.  
  • Limit the ability of managers or supervisors to single-handedly adjust pay for specific individuals. This puts in place checks and balances to ensure one-off decisions do not lead to pay inequalities.  
  • Help managers and supervisors understand pay equity. Training will help them recognize how to best develop a culture within their teams and the organization that embraces pay equity.  
  • Communicate openly and regularly with employees. Let them know how you have set compensation and reassure them they can discuss pay with their supervisors without the fear of retaliation. More transparency across the organization can lead to greater pay equity.  

No question, pay equity is a challenging issue that can result in some tough questions for management and human resources. Addressing it will not be a “one and done” activity, but something that needs to be an ongoing focus. If your company makes this a priority, you will establish your business as one that pays equitably, enhancing your employer brand in today’s competitive labor market.  

How We Can Help 

While you are focusing on how much to pay your employees, DM Payroll Solutions can help you to ensure your employees are paid accurately and on time. Our user-friendly software allows you to validate employee-made changes, preview your payroll and submit with confidence. Contact us today for more information.